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Archer-Daniels-Midland Q4 2021 Earnings Call Transcript


Listen to Conference Call View Latest SEC 10-K Filing

Participants

Corporate Executives

  • Vikram Luthar
    Senior Vice President, Head of Investor Relations & Chief Financial Officer of Nutrition Business
  • Juan R. Luciano
    Chairman of the Board of Directors, President and Chief Executive Officer
  • Ray G. Young
    Executive Vice President and Chief Financial Officer

Presentation

Operator

Good morning, and welcome to the ADM Fourth Quarter 2021 Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded.

I would now like to introduce your host for today's call, Vikram Luthar, Senior Vice President, Head of Investor Relations, Chief Financial Officer, Nutrition for ADM. Mr. Luthar, you may begin.

Vikram Luthar
Senior Vice President, Head of Investor Relations & Chief Financial Officer of Nutrition Business at Archer-Daniels-Midland

Thank you, Greta. Good morning, and welcome to ADM's fourth quarter earnings webcast. Starting tomorrow, a replay of today's webcast will be available at adm.com.

For those following the presentation, please turn to Slide 2, the company's Safe Harbor statement, which says that some of our comments and materials constitute forward-looking statements that reflect management's current views and estimates of future economic circumstances, industry conditions, company performance and financial results. These statements and materials are based on many assumptions and factors that are subject to risks and uncertainties. ADM has provided additional information in its reports on file with the SEC concerning assumptions and factors that could cause actual results to differ materially from those in this presentation, and you should carefully review the assumptions and factors in our SEC reports. To the extent permitted under applicable law, ADM assumes no obligation to update any forward-looking statements as a result of new information or future events.

On today's webcast, our Chairman and Chief Executive Officer, Juan Luciano, will provide an overview of the quarter and the year. Our Chief Financial Officer, Ray Young, will review the drivers of our performance as well as corporate results and financial highlights. Then Juan will discuss our outlook, after which they will take your questions. Please turn to Slide 3.

I will now turn the call over to Juan.

Juan R. Luciano
Chairman of the Board of Directors, President and Chief Executive Officer at Archer-Daniels-Midland

Thank you, Vikram. Our team delivered a superb fourth quarter. This morning, we reported record fourth quarter adjusted earnings per share of $1.50. Adjusted segment operating profit was $1.4 billion, 23% higher than the fourth quarter of 2020. Our trailing fourth quarter adjusted EBITDA was $4.9 billion, $1.25 billion more than a year ago. And our trailing fourth quarter average adjusted ROIC was 10%, meeting our objective.

Slide 4, please. That performance represented a strong finish to an outstanding 2021. For the full year, our adjusted EPS was $5.19, also a record, and full year adjusted segment operating profit was $4.8 billion. This excellent performance was reflected across the company. The Ag Services and Oilseeds team's actions to improve their business portfolio and strengthen their operating model continues to enable superior performance in a strong market environment. AS&O delivered full-year 2021 OP of $2.8 billion with each subsegment performing at or near historic highs.

Carbohydrate Solutions executed phenomenally well to deliver full-year operating profits of $1.3 billion, and the team is continuing the evolution of Carbohydrate Solutions from the sale of our Peoria drain -- dry mill, and the announcement of a sustainable aviation fuel MoU through our agreement with LG Chem and the continuous growth were exciting by the Solutions platform which delivered new revenue wins with an annualized run rate of almost a $100 [Phonetic] million.

Through the project we announced earlier this month to further decarbonize our operations by connecting two other major processing facilities to our Decatur carbon capture and storage capabilities. The Nutrition team once again delivered industry-leading revenue and OP growth with full year revenues up 16% and full year OP of $691 million, representing a 20% year-over-year increase. We also continued to enhance our Nutrition business with the strategic investments targeted at growing areas of demand, including Sojaprotein, which will expand our participation in alternative proteins, PetDine will substantially enhance our presence in pet food and treats. Deerland, we continued the expansion of our functional probiotics and enzymes portfolio within our global health and wellness business. And FISA, which enhance our flavor footprint by opening up new growth opportunities in Latin America and the Caribbean.

Slide 5 please. Last month at our Global Investor Day, we unveiled our strategic plan and reiterated our balanced financial framework for value creation, including using our strong cash flows to deliver both growth investments and distributions to shareholders. We are confident in our plan and [Technical Issues] which is why we are pleased to announce an 8% increase in our quarterly dividend to $0.40 per share. We are proud of our record of 90 uninterrupted years of dividends and more than 40 years of consecutive annual dividend increases, and we are pleased to continue to follow through on our commitment to shareholder value creation. It's been a great year and we are excited about what's to come. Our continued actions to build a better ADM and dynamically align it with the global trends of food security, health and well-being and sustainability and the steadfast advancement of our productivity and innovation initiatives will help propel our 2022 results.

I will talk in more detail about the upcoming calendar year shortly. But first, I'd like to turn the call over to Ray to review our business performance. Ray?

Ray G. Young
Executive Vice President and Chief Financial Officer at Archer-Daniels-Midland

Yeah, thanks, Juan. Good morning, good afternoon, everyone. Slide 6 please. The Ag Services and Oilseeds team capped off really a truly impressive year, successfully navigating through supply chain challenges to deliver results largely in line with the extremely strong prior year quarter. The Ag Services team performed well in an environment of continued strong global demand, including significantly increased export volumes for customers outside of China. Global trade was substantially higher year-over-year, driven by solid risk management and improved results in global ocean freight. Overall, Ag Services delivered strong results, just slightly off the outstanding fourth quarter of 2020 when we benefit from exceptionally high export margins.

Crushing executed well in a continued solid demand environment for both soybean meal and vegetable oil. Lower results in EMEAI versus a very strong fourth quarter of 2020 and approximately $250 million in net negative timing impacts versus negative $125 million in the prior year quarter drove overall results lower year-over-year. The majority of those negative timing effects are expected to reverse in the first half of 2022. Refined Products and other team delivered substantially higher results versus the prior year period, driven by strong volumes and margins in North America for refined oils and improved biodiesel margins in North America and EMEAI, which more than offset weaker South American results due to the reduced biodiesel mandate. Equity earnings from Wilmar were higher year-over-year. Looking ahead, we expect a strong first quarter from Ag Services and Oilseeds, higher than the first quarter of 2021 and in line with the just ended fourth quarter.

Slide 7 please. Carbohydrate Solutions fourth quarter results were more than double the prior year quarter. In Starches and Sweeteners subsegment, including ethanol production from our wet mills, results were were lower versus the fourth quarter of 2020, driven by higher input costs, including energy costs in EMEAI, as well as lower wheat milling volumes, partially offset by continued strong ethanol margins. Volumes for North America sweeteners and starches were largely flat year-over-year. Vantage Corn Processors results were again substantially higher year-over-year, driven by historically strong industry ethanol margins as a result of strong demand relative to supply, as well as increased sales volumes due to production at the two dry mills that were idle in the previous year period. As we look ahead, we believe the first quarter for Carbohydrate Solutions should be similar to or slightly above the strong first quarter of 2021.

Slide 8 please. The Nutrition business closed out a year of consistent and strong growth with fourth quarter revenues 19% higher year-over-year, 21% on a constant currency basis with 26% higher profits year-over-year and sustained strong EBITDA margins. Human Nutrition had a great fourth quarter with revenue growth of 21% on a constant currency basis and a substantially higher profit. Flavors continued its growth trajectory, driven primarily by improved product mix in EMEAI and continued strong performance from North America, partially offset by weaker APAC results. In Specialty Ingredients, overall profits for the fourth quarter were in line with the year ago period, as strong demand for plant-based proteins offset the impact of onetime insurance proceeds in the fourth quarter of 2020. Health & Wellness was higher versus the prior year quarter as the business continued to deliver growing profits in bioactives and fermentation.

Animal Nutrition revenue was up 21% on a constant currency basis and operating profit was much higher year-over-year, driven primarily by continued strength in amino acids. Now looking ahead, we expect Nutrition to continue to grow operating profits at a 15% plus rate for calendar year 2022, with the first quarter similar to the first quarter of 2021, with continued revenue growth, offset by some higher costs upfront in the year in the absence of the one-time benefits we saw in the first quarter of the prior year.

Slide 9 please. Now let me finish up with a few observations from the other segment, as well as some of the corporate line items. Other Business results were substantially higher, driven primarily by higher Captive Insurance underwriting results as the prior year quarter included larger intra-company insurance settlements. For calendar year 2022, we expect Other Business results to be similar to 2021, although for the first quarter we expect a loss of about $25 million due to insurance settlements currently planned.

Net interest expense increased year-over-year on higher short-term borrowings. In the corporate lines, un-allocated corporate costs of $276 million were lower year-over-year due primarily to increased variable performance related compensation expense accruals in the prior year, partially offset by higher IT offering and project related costs and transfers of costs from business segments into the centralized centers of excellence in supply chain and operations. We anticipate calendar year 2022 total corporate costs including net interest, corporate unallocated, and other corporate to be in line with the $1.2 billion area consistent with what I discussed at Global Investor Day, with net interest roughly similar, corporate unallocated a bit higher and corporate other a bit lower.

The effective tax rate for the fourth quarter of 2021 was approximately 21% compared to 8% in the prior year. The calendar year of 2021 effective tax rate was approximately 17%, up from 5% in 2020. The increase for the calendar year was due primarily to changes in geographic mix of earnings and current year discrete tax items, primarily valuation allowance and return to provision adjustments. Looking ahead, we're expecting full-year 2022 effective tax rate to be in the range of 16% to 19%. Our balance sheet remains solid with a net debt to total capital ratio of about 28% and available liquidity of about $9 billion.

With that, let me turn it back to Juan. Juan?

Juan R. Luciano
Chairman of the Board of Directors, President and Chief Executive Officer at Archer-Daniels-Midland

Thank you, Ray. Slide 10 please. I hope most of you were able to join us on our Global Investor Day last month. There, we showed that we have consistently advanced our strategy from our work to improve ROIC through capital cost and cash, to our strategic growth and margin enhancement accomplishments, including the creation of a global nutrition business to today's focus on productivity and innovation. Thanks to this work, we are moving into 2022 with a better ADM, and more returns, focused organization with higher margins and less volatility -- volatile earnings, and a portfolio that is well-positioned to capitalize on the positive structural changes being driven by the enduring global trends of food security, health and well-being, and sustainability.

Slide 11 please. Let me take a few moments to talk about how we see the 2022 environment. In Ag Services and Oilseeds, we see a continued favorable global demand environment. Due to a short growth in South America with the magnitude of the shortfall still to be determined, we expect global Ag commodity volumes will rely relatively more on the U.S. market for their needs, assuming we have a normal U.S. crop later this year. On the Oilseeds side, we're starting 2022 with a strong soy crush margins. And as we discussed at Global Investor Day, we believe that increasing demand for meal as well as vegetable oil as a feedstock for renewable green diesel should continue to support the positive environment this year with our soy crush margins in the range of $45 to $55 per metric ton. Assuming this dynamics play out, we believe that Ag Services and Oilseeds in 2022 has the potential to deliver operating profit similar to or better than 2021.

For Carbohydrate Solutions, we are assuming the demand and margin environment for our starch and sweetener products will be steady versus 2021. We expect the industry ethanol environment to continue to be constructive, supported by the recovery of domestic demand to pre-COVID levels, energy cost driving higher exports and better clarity on the regulatory landscape. With this in mind, we are assuming higher ADM ethanol volumes and EBITDA margins to average $0.15 to $0.25 for the calendar year. In addition, we are expecting our BioSolutions platform to deliver another year of solid growth as we continue to evolve the Carbohydrate Solutions business. Putting it all together, we expect Carbohydrate Solutions to deliver full-year operating profit slightly lower than their outstanding 2021.

In Nutrition, we're expecting continued growth in demand from -- for our unparalleled portfolio of nutrition ingredients and systems, along with the benefits of accretion from our recent acquisitions. With these dynamics, we expect 15% plus percent OP growth in 2022, revenue growth above 10% and EBITDA margins above 20% in Human Nutrition and high single digits in Animal Nutrition, consistent with targets we set out at our Global Investor Day.

Slide 12 please. So as we look forward in 2022, we see a positive demand environment across our portfolio, and then we add to that things we can do better. Our execution was great in 2021, but we are always identifying opportunities for improvement and we intend to do even more to meet this growing demand in 2022. Put it all together, and we are optimistic for another very strong performance in 2022 as we progress towards our strategic plans next earnings milestones of $6 to $7 per share.

With that, operator, please open the line for questions.


Questions and Answers

Operator

Thank you. [Operator Instructions] And our first question on the phone lines comes from Ben Theurer of Barclays. So, Ben, please go ahead.

Benjamin Theurer
Analyst at Barclays

Yeah, thank you very much, and good morning. Juan, Ray, congrats on those very strong results.

Juan R. Luciano
Chairman of the Board of Directors, President and Chief Executive Officer at Archer-Daniels-Midland

Thank you, Ben.

Ray G. Young
Executive Vice President and Chief Financial Officer at Archer-Daniels-Midland

Thank you, Ben.

Benjamin Theurer
Analyst at Barclays

So to start off, maybe just to stay a little bit within the outlook, I mean clearly you continue to have a very positive view on the segment side. But could you also share a little bit your assumptions in terms of capex needs and where you think investment need to be put into in order to deliver on the actual supply on these, so a little bit of your capex program and how you feel about that and ultimately the results flowing down to net income and what your expectations are for 2022?

Juan R. Luciano
Chairman of the Board of Directors, President and Chief Executive Officer at Archer-Daniels-Midland

Yes. So many questions [Indecipherable] one, Ben. Good job. Listen, on the capex perspective, yeah, as you look at our strategic plan, most of our strategic plan is coming from organic growth and productivity. So in order to fund that, we're going to have a little bit higher capex this year of about $1.3 billion. That will be, of course, in some of the projects we need to do to expand, like Spiritwood, that we announced our JV with Marathon, but also again some productivity enhancement just to make sure we deliver bigger volumes as we supply that demand. But you know, we are facing 2022 with a very strong perspective for the first quarter. We are entering the year with great momentum as we left -- as we left 2021 also in a big high.

So at this point in time, we continue to see a very strong 2022, and I think I described it in all my comments, our Ag Services and Oilseeds continue to be firing in all cylinders and we expect the year as good as last year or maybe even better. Carb Solutions also going very strong with many -- with very a stable starch and sweeteners and with always some uncertainty on ethanol, but with a favorable environment. And BioSolutions continue to grow as we grew last year. And again, Nutrition going at above 15% per year operating profit growth on double digits of revenue growth. So all in all, we feel very good about all the things that we can control.

Benjamin Theurer
Analyst at Barclays

Okay, perfect. Thank you so much. And then just one last question, just a quick one. If you think about your medium-term targets and I remember you have laid out, obviously, as well the initiatives for share buybacks, etc., but in light of the higher capex plus the increase in dividend, fair to assume that share buybacks at least in the short-term aren't going to be a priority yet, correct?

Juan R. Luciano
Chairman of the Board of Directors, President and Chief Executive Officer at Archer-Daniels-Midland

Yeah, I think that the priorities for capital allocation is to deliver it after we had maybe a couple of billion invested in [Indecipherable] certainly fund the projects that we have in higher capex that I described and then the dividend to support the dividend. Of course, cash flow generation is a strong in ADM. You know we focus a lot on that. So as cash flow becomes available, I mean we're going to think in the -- again in the five-year plan to have more buybacks in the later period, but if cash flow continues to be as strong, we may anticipate that a little bit. At this point in time, we don't expect significant M&A as part of our plan. So that will be the capital allocation position.

Benjamin Theurer
Analyst at Barclays

Perfect, Juan. Very clear. Thank you very much and congrats again.

Juan R. Luciano
Chairman of the Board of Directors, President and Chief Executive Officer at Archer-Daniels-Midland

Thank you, Ben.

Operator

Thank you, Ben. We now have the next question from Ben Bienvenu of Stephens. So, Ben, please go ahead. Your line is open.

Benjamin Bienvenu
Analyst at Stephens

Hey, thanks. Good morning, and congrats on the strong quarter.

Ray G. Young
Executive Vice President and Chief Financial Officer at Archer-Daniels-Midland

Thank you, Ben.

Benjamin Bienvenu
Analyst at Stephens

I want to follow-up on the outlook commentary which was really helpful and detailed. Of particular interest to us is the bio-products commentary that you offered. I think within the Carbohydrate Solutions business, the commentary around Starches and Sweeteners makes sense. The bio-products obviously benefited from a very strong fourth quarter and I suspect perhaps you had an opportunity to secure margins into the first quarter. But the commentary is pretty positive through the balance of the year and I realize higher production will help in benefiting operating profit for that business. Can you talk a little bit about what then forms your view for the strength of the ethanol business sustaining into 2022?

Ray G. Young
Executive Vice President and Chief Financial Officer at Archer-Daniels-Midland

Hey, Ben, good morning. It's Ray here. Yeah, we finished up very strong in the bio-products versus ethanol specifically. In the fourth quarter, demand environment was very, very constructive and I think that's just reflective of what was happening in terms of the recovery in driving miles in the United States, the holiday season, gasoline demand was strong, best translates to strong demand for ethanol. And on the supply side, and actually industry had some supply challenges and so that translated to a very robust environment. In fact, our EBITDA margins in the fourth quarter for our ethanol business were above $1 a gallon, which is very, very -- yeah, on a historical basis, very, very strong. We indicated that as we go into 2022, we feel optimistic about ethanol as well.

Now, while inventories have built up a little bit in January, and that's just the seasonal nature of ethanol -- of inventory builds, a couple of things give us optimism for 2022. Number one, we do expect domestic demand for ethanol to be strong. In fact, it will be a growth year-over-year from '21 to '22, and frankly we're seeing ethanol demand probably returning back to pre-pandemic levels of demand here in United States. So we're talking about domestic demand probably in the 14 billion gallon level. Secondly, I think you're going to see a recovery around the world on gasoline demand and hence ethanol demand as well. And as you know with the movement in crude oil prices, in general, ethanol is becoming one of the most attractive oxygenates in the world. So we do see the export demand side of the equation in 2022 being also very constructive for ethanol, with ethanol probably recovering to 1.4 billion to 1.5 billion gallons in terms of export demand. So that's very, very constructive.

Thirdly, we do believe that the regulatory landscape has clarified itself in the context of small refinery exemptions. I know there are some challenges going on here. But what we see right now is going forward, smaller SREs, as they call it, small refinery exemptions will not have an impact in terms of kind of like the supply-demand balances. And we talk internally that when they say 15 billion gallons, it means 15 billion gallons, right, in terms of what we need to deliver to the marketplace. So that's actually a positive also for our industry. And then they've also demanded about 250 million gallons in terms of requirements as well going forward. So when you add it all together, the fact that and we're starting off the year with a fairly balanced supply-demand perspective in terms of U.S. ethanol inventories to a demand environment that's going to be even more constructive versus 2021. And three, a regulatory environment that seems to be supportive of where we want to go, we're actually having constructive viewpoint.

As Juan indicated, directionally we're assuming $0.15 to $0.25 per gallon as EBITDA margins for 2022. That's lower than the '21 assumption and maybe we're just being a little bit conserved at this juncture as we start off the year. But nevertheless, we do believe that it should be a favorable environment for us as we move forward into 2022.

Benjamin Bienvenu
Analyst at Stephens

Okay, that's great. Very helpful, Ray. Thank you. And my second question is just related to the global operating environment, in particular some of the goings on in Ukraine at the moment and tensions there. Is that -- how is that manifesting itself today in terms of impact to your business? I know from an asset perspective you guys don't have super heavy exposure there, but they're a major producer of grade feed, corn, wheat, barley. So I'm curious what impact you're seeing in the market today and how you think about the potential impact as we look into 2022, recognizing a lot of different scenarios could play out there?

Juan R. Luciano
Chairman of the Board of Directors, President and Chief Executive Officer at Archer-Daniels-Midland

Yeah, Ben. Of course, you realize the supply of many commodities remain at their tightest level in years. So I think any news around the world of disruption, whether it's weather or geopolitics, it's going to prolong the high prices well into 2023. As you described, at this point in time there are three things. We are all looking at the development of the crops in South America, as they need to go through February rains, especially in Argentina and the harvest in Brazil. We are looking, of course, at geopolitical conflicts, and like the one you described. And also the expectations of the crop in the U.S. All these in the middle of a very strong demand. So as you said, Ukraine is the big exporter, especially if you think about corn and the ability to supply China needs, you have the three main suppliers were these, the U.S., and you have Ukraine and you have Brazil. So hopefully Brazil with these rains will have a [Indecipherable] crop, but this maybe a little bit better than what we expected. But among the three countries, need to cover the supply of corn and corn today is one of the best sources of energy. In fact, they are one of the cheapest ones. So it's a very demanding product. So we're all paying attention to what's happening with ethanol.

Benjamin Bienvenu
Analyst at Stephens

Okay. Thank you, Juan. Congrats on the quarter and best of luck into 2022.

Juan R. Luciano
Chairman of the Board of Directors, President and Chief Executive Officer at Archer-Daniels-Midland

Thank you, Ben. Thank you very much.

Operator

Thank you. We now have another question on the phone lines from Adam Samuelson of Goldman Sachs. So Adam, please go ahead when you're ready.

Adam Samuelson
Analyst at The Goldman Sachs Group

Yes, thank you, and good morning, everyone.

Juan R. Luciano
Chairman of the Board of Directors, President and Chief Executive Officer at Archer-Daniels-Midland

Good morning, Adam.

Adam Samuelson
Analyst at The Goldman Sachs Group

I guess, my first question, I want to come back to the outlook in Carbohydrate Solutions and just make sure I'm understanding the moving pieces to think about full-year 2022 outlook that's only slightly below 2021, where both your '22 -- '21 performances was above what you would have expected in 2025 for the unit. I'm just trying to think about the moving pieces with ethanol and maybe there's a clarification point on that. When you talk about ethanol margins, $0.15 to $0.25 a gallon EBITDA, is that purely the dry mill gallons within Vantage Corn Processors, is that including the wet mill? And I guess in that vein, in the fourth quarter given the strong ethanol margin environment, I guess I was surprised to have seen the Starches and Sweeteners business be down if that would -- fuel also been benefiting from a strong U.S. ethanol environment. Maybe just help us think about the -- some of the bridges of the pieces within the segment to get you to the '22 outlook.

Ray G. Young
Executive Vice President and Chief Financial Officer at Archer-Daniels-Midland

Yeah, Adam, it's Ray here. So $0.15 to $0.25 EBITDA margin represents total ethanol wet mill and dry mills. So that's a combined basis on the assumption. In the fourth quarter, we had, as you saw, an outstanding quarter. VCP really benefited from the ethanol margins and clearly Starches and Sweeteners also benefit as well on the ethanol side of the business. Our net corn cost was a little bit higher in the fourth quarter for Starches and Sweeteners. And if you recall, when we hedged -- when we hedged 2021 for corn, we put on a very attractive hedge position in 2020 for a lot of our 2021 requirements, but not all the requirements. And so when we got to the fourth quarter, I think we were a little bit more exposed on that corn. And so therefore the higher net corn cost translates maybe a little bit lower margin on the sweetener side of the business there.

We also had some operating challenges with the startup of Bulgaria in Europe, which again, this is an opportunity, frankly speaking for us in 2022, right? And we also had some higher energy costs over in Europe as well. As you know, natural gas prices ran up significantly in the back part of the year. So that impacted our energy costs over in Europe and that flowed through in terms of our Starches and Sweetener segment. So there were a bunch of puts and takes that moved through the fourth quarter. Again, we think a lot of that will be behind us because I think we've put ourselves, put in a good hedge position for 2022. And then also we believe that we've got the Bulgarian project. We've addressed a lot of those issues and that should be a plus delta for us in 2022 as well.

Adam Samuelson
Analyst at The Goldman Sachs Group

Okay. That color is really helpful. And if I could just switch gears over to the Nutrition segment, and maybe help us think a little bit about the expectations for the business on an organic basis. In 2022, I know there was a -- you did some M&A through the second half of 2021. So you talked to 10% plus revenue growth and 15% gross profit growth. Can you help us think about the M&A contributions within that and any specific parts of the business that you might be more optimistic than the segment average in areas where the growth might be a little below that?

Juan R. Luciano
Chairman of the Board of Directors, President and Chief Executive Officer at Archer-Daniels-Midland

Yes, so I think most of 2022 will be on an organic growth basis, if you will, contribution, state of the acquisitions, it's going to happen a little bit later. These acquisitions are not made, to be honest, for the accretion of 2022. As you recall, we are just building the Nutrition business. So this is the strategic importance of positioning ourselves in the areas where we've been informing you. I think that we always like to have the policy of no surprises and I think you heard me saying Health & Wellness is an area where we were going to invest and that's why we did deal in pet food and that's why we did PetDine. We continue to think about the incredible potential of plant-based proteins and that's why we did Sojaprotein, which is making us more international. And I talked about how powerful we are in flavors, but we were underrepresented, if you will, in the emerging markets and that's why we invested in capacity in Peoria, both flavors in China, and we also acquired FISA that gives us the beachhead into Central America, Caribbean and maybe northern parts of Latin America.

So when we look at the business and our confidence in the 15% plus organic operating profit growth is driven by our pipeline and our win rates, to be honest. That's where we looked. Our pipeline continues to increase. Our product launches continues to increase and actually accelerate and our win rates have almost doubled from one year to the other. So, the business is operating very well. We guided flat for Q1 just because of the way some of the costs fall and they are more front-loaded into next year, but this is a business. Again, it's been growing 34%, 20%. I think we're going to stabilize in the long-term at this rate of 15%, 15% plus with double-digit organic growth basically without even touching the M&A for that growth.

Adam Samuelson
Analyst at The Goldman Sachs Group

Got it. That's all really helpful. I'll pass it on. Thank you.

Juan R. Luciano
Chairman of the Board of Directors, President and Chief Executive Officer at Archer-Daniels-Midland

Thank you, Adam.

Operator

Thank you. We now have a question from Robert Moskow of Credit Suisse. So, Robert, I've opened your line.

Robert Moskow
Analyst at Credit Suisse Group

Hi, thanks for the question, and congrats on a great year.

Ray G. Young
Executive Vice President and Chief Financial Officer at Archer-Daniels-Midland

Many thanks, Robert.

Robert Moskow
Analyst at Credit Suisse Group

You kind -- of course. And maybe you've kind of implied this already, but your pricing for corn sweeteners in 2022, can you describe how the negotiations went and it looks like what you're guiding to with kind of flattish profits in North America for corn sweeteners as a result of that pricing. Is that a fair assessment?

Ray G. Young
Executive Vice President and Chief Financial Officer at Archer-Daniels-Midland

Yeah, Rob, I mean, our objective is really to maintain margins and so through the course of the negotiations, I think it's fair to make an assumption that we've been able to maintain margins and offset the higher corn costs, that, that is curbed [Phonetic] recently. So I think we've achieved that objective, and that's a fair assumption as soon as we go into 2022.

Robert Moskow
Analyst at Credit Suisse Group

Okay, and maybe a follow-up. The expansion of refined soybean oil is driven by the growing demand of a renewable biodiesel. Have you been watching the industry -- the planned industry expansion for all of those refineries? And what kind of -- is it achieving what you'd expect? Are the -- is the capacity coming online as expected and is it having the results on demand for oil that you expected?

Juan R. Luciano
Chairman of the Board of Directors, President and Chief Executive Officer at Archer-Daniels-Midland

Yes, of course, we -- we keep a close eye into that. You have to understand that at this point in time demand continues to outpace given the announced capacity expansions. But there is a reality also in this world of supply shortages and labor issues that projects are not that easy to execute. So I think that when you look at a battery of announcements like the way we've seen, I think it's reasonable due to the percentage that is going to happen, either the reality or that they all going to happen, but in a little bit longer timeline. So we tend to look at that from a long-term basis or maybe something like two thirds or 75% will happen. At this point in time, we see the volume coming our way.

And you have to remember that the original oil story, Rob, it was due to tight palm oil around the world and that drove soybean oil and other oils up. And now on top of that, now we have the demand for RGD. So that -- now there is a full confluence of raw materials to be able to supply that oil. And so, yes, we are looking at this very closely. And at this point in time, everything is evolving as planned.

Robert Moskow
Analyst at Credit Suisse Group

Okay. All right, well, thank you.

Juan R. Luciano
Chairman of the Board of Directors, President and Chief Executive Officer at Archer-Daniels-Midland

You're welcome.

Operator

Thank you, Robert. We now have Tom Palmer of J.P. Morgan. So, Tom, your line is open. Please go ahead.

Tom Palmer
Analyst at J.P. Morgan

Hi. Good morning. Thank you for the questions and congratulations on the quarter.

Juan R. Luciano
Chairman of the Board of Directors, President and Chief Executive Officer at Archer-Daniels-Midland

Thank you, Tom.

Ray G. Young
Executive Vice President and Chief Financial Officer at Archer-Daniels-Midland

Thank you, Tom.

Tom Palmer
Analyst at J.P. Morgan

Maybe I can follow-up -- Maybe I can follow-up on Rob's question just on the refined products outlook and maybe a little more specific on how you're thinking about the setup for 2022. We do have maybe the first larger wave of facilities coming on line with pre-treatment unit, although that is at least back-half weighted I think. So, it is -- maybe what's the assumption for refined products this year and do you think that, that will -- that addition in terms of capacity is going to have much impact or as you're noted in the broad maybe just with timing and kind of needs of still sourcing from at least a portion from third parties it won't be as impactful?

Juan R. Luciano
Chairman of the Board of Directors, President and Chief Executive Officer at Archer-Daniels-Midland

Yeah, Tom, listen, we continue to believe we will have around 1 billion gallons per year of incremental R&D -- RGD capacities and approach that 5 billion gallons of that capacity by 2025. And as I was telling Rob, we continually risk [Indecipherable] the announced capacity and analyze the market conditions. So we have several scenarios indeed. We do believe this announced capacity are important to and necessary to keep up with the expected demand growth for both vegetable oil as I explained before, but also global meal demand needs. And at this point, vegetable oil consumption is still growing faster than supply. We got then a little bit good news from the sun oil availability from the Black Sea that maybe will help bean oil tightness.

And so regarding the pre-treat comments, in the end the vegetable oil will be required as a feedstock and pricing will reflect the value of this feedstock, likely based on carbon intensity. So we could see some shift in value between the crude oil and the refining. I think what we need to realize is we are at the early stages of this industry formation. So we're going to see some of that movement and sometimes we're going to capture the value in one place, sometimes we're going to capture the value in another one. But we are well positioned. Our biodiesel plants are all integrated in refineries and all that. So, we are watching it very closely. We feel good about how it's developing so far.

Tom Palmer
Analyst at J.P. Morgan

Great. Thank you for that. And maybe I'll segue with that to the crushing side. It seems like you're starting off the year with quite strong soy crush margins, perhaps higher than maybe you're guiding to for the year. Is there a, I guess catalyst or driver that maybe makes margins weaker? Is there a bit of conservatism embedded as we see headlines around pricing shortage? Is that something you're expecting to resolve itself and maybe see still a very favorable crush environment, but a little more normalized versus to start off the year?

Juan R. Luciano
Chairman of the Board of Directors, President and Chief Executive Officer at Archer-Daniels-Midland

Yeah, there are many. Of course, it's a larger industry, so many puts and takes. When we look at the demand side, the forecasted 2022 poultry production is going to be a record and near record for beef and hog. So protein demand continues to grow around the world and that's sustaining a lot. There is a tight meat proteins and synthetics amino acids and that's supporting soybean meal. Remember, I mentioned fat is very expensive today and energy as well. So corn at this point in time is the cheapest carbohydrate. That's pulling soybean meal into the Russian, and we expect that one point in time the life in market come, maybe back into balance later in 2022. But still, the SMVs [Phonetic] are very beneficial to soybean meal and to crush.

So I think also don't forget RGD is also changing the dynamics for soybean meal, making soybean meal from the U.S. much more competitive and unable to gain some export markets. And when you have maybe a less than stellar soybean crop in Argentina, Argentina being such a strong exporter of mill, I think that bodes well for crush margins in North America and also in Europe.

Tom Palmer
Analyst at J.P. Morgan

Thank you.

Juan R. Luciano
Chairman of the Board of Directors, President and Chief Executive Officer at Archer-Daniels-Midland

Thank you, Tom.

Operator

We now have the next question from Vincent Andrews of Morgan Stanley. So, Vincent, please ensure your line is unmuted lately and you may go ahead.

Steve Haynes
Analyst at Morgan Stanley

Hi, this is Steve Haynes on for Vincent. I wanted to ask a question on the BioSolutions business and the $100 million of annualized revenue wins in 2021, and if you could maybe just provide some more color on specific end markets where you're getting those wins and then how to think about the size of that going forward?

Juan R. Luciano
Chairman of the Board of Directors, President and Chief Executive Officer at Archer-Daniels-Midland

Yes, thank you for the question, Steve. Listen, we are very excited about how that business is developing. I think we recognized in the past that that business happened almost while we were not watching and with the customer pool more than our push and now we have a segment approach to that. We have intentionality been developing that market and that as such the opportunities have flourished. I would say a strong contribution from packaging, a strong contribution from fermentation, just -- we're helping other people that are creating some of these materials out of plant-based. Personal and home care, very important segment, that is growing and a growing contribution from pharma, construction and plants treatment.

So as you can tell, as we continue to deploy marketing resources into some of the segments, we continue to have success. So there are some segments that are more developed and larger for us and some segments that are more incipient. But I think it's going very well. We are working on the product mix, as you know sometimes the growth is faster than our capacity. So we're trying to accommodate that. And we're going to be having more capacity coming up soon to be able to sustain these 10% growth rates of revenue that we have.

Steve Haynes
Analyst at Morgan Stanley

Thank you.

Juan R. Luciano
Chairman of the Board of Directors, President and Chief Executive Officer at Archer-Daniels-Midland

You're welcome.

Operator

Thank you, Vincent. We now have Ken Zaslow of BMO Capital Markets. So, Ken, please go ahead when you're ready, Ken.

Kenneth Zaslow
Analyst at BMO Capital Markets

Hi. Good morning, everyone.

Juan R. Luciano
Chairman of the Board of Directors, President and Chief Executive Officer at Archer-Daniels-Midland

Good morning, Ken.

Ray G. Young
Executive Vice President and Chief Financial Officer at Archer-Daniels-Midland

Hey, Ken.

Kenneth Zaslow
Analyst at BMO Capital Markets

Yeah, let me just take a different approach. When you think about your -- you talked about all the things that are happening on the demand side, but at your Analyst Day you did talk about the cost structure increasing and that there was going to be some headwinds. As I look forward, these headwinds don't seem to be materializing to the extent or are they and since you framed, how you put it during the Analyst Day and where you see they are going through to that? Where do you see them now, where do you see them through 2022, and are you really seeing them develop the way you thought they will or they're a little bit lower than you thought?

Juan R. Luciano
Chairman of the Board of Directors, President and Chief Executive Officer at Archer-Daniels-Midland

Yes, the dynamics here, Ken, of course, is we have forecasted or accounted for some, the potential reversion of margins and some inflation, of course, that we were going to have, and that is difficult to estimate the timing and then we have productivity and innovation. That is going to be growing in their impact as some of these projects develop. So when we look at, if you will, at the negative side of the equation, the positive side we can control and the negative side we put together several scenarios. And I would say the biggest manifestation of that at this point in time has been energy inflation, an inflation for some smaller product. We suffered probably more of these and some supply chain disruptions and labor shortages that you probably hear every company talking about.

I would say from an energy perspective the impact is probably more on Europe, whether it's on crush or carb solutions. That's where we see the impact. And we have our team basically working on energy efficiencies and saving some percentages of that increase and also our hedging mechanism and all that. On the raw materials side and the supply chain disruption, that's probably more the territory of Nutrition. Nutrition as you can imagine have more variety of raw materials and more SKUs. So the complexity of that business make it more exposed to some of these wins. So that's the way we're looking at. That is more the European energy increase and some of the nutrition one-offs that are here and there on supply chain.

Kenneth Zaslow
Analyst at BMO Capital Markets

My second question is, and I appreciate that. On the China side, I think last call and the call before you outlined how the demand is growing. I know 2021 was an extraordinary year for China demand. How do you think that's going to play out in 2022 and 2023 in terms of -- will there be a mix change, will there be increased demand? How do you think of that it relative to your business model? And I appreciate your time, as always.

Juan R. Luciano
Chairman of the Board of Directors, President and Chief Executive Officer at Archer-Daniels-Midland

Yeah, thank you, Ken. Listen, we think that China has recovered from the ASF. They recovered here, and you saw the dynamics in terms of pork prices coming up and down. We still believe that they will import some -- they will import soybeans in the high 90s, 96 million, 97 million, give or take, and around probably 25 million tons of corn. Again, when we are watching the way they are managing through COVID challenges, but we expect demand will continue to grow, it continues to be supported by improved diet and professional feeding practices.

Even if we see some moderation of GDP, we think that we've seen per capita consumption of the top four needs basically increases and even if they correct it a little bit, they correct versus 2021, they are still much bigger than the pre-ASF and pre-pandemic. So we configured with the number here or there, but still it's going to be very strong. And as I said, probably 96 million, 97 million of soybeans, 25 million of corn, that will provide a good base for the grain industry and the crushing industry.

Kenneth Zaslow
Analyst at BMO Capital Markets

Great. I appreciate it. Thank you, guys.

Juan R. Luciano
Chairman of the Board of Directors, President and Chief Executive Officer at Archer-Daniels-Midland

Thank you, Ken.

Operator

Thank you, Ken. We now have a question from Ben Kallo from Baird. So, Ben, please go ahead when you're ready.

Benjamin Kallo
Analyst at Robert W. Baird

Hi. Hi, good morning, everyone, and thanks for taking my question. Ray, you touched on the regulatory environment just in your ethanol comments or maybe just on a broader level just maybe around renewable diesel if you guys could talk about that? And then on the legislative front, I hate to ask because it's anyone's best guess, but what -- how you see maybe the blender's tax credits and anything around aviation fuel evolving? Thank you.

Ray G. Young
Executive Vice President and Chief Financial Officer at Archer-Daniels-Midland

Yeah, on the biodiesel, as you know, the current blender's credit continues until the end of 2022 -- December 31, 2022. So we're -- naturally we're looking at what's happening on the legislative agenda in Washington on the BBB program to see whether it gets renewed. But historically what you've seen is the -- both -- frankly both parties are supportive of the biodiesel industry. It's important for United States. And so even if something doesn't occur on BBB, we're optimistic that the blender's credit will get extended in one way or another through some form of legislation as we kind of move through the year-end. If you recall, sometimes it happens after we get through the end of the year and then you have a retroactive biodiesel tax credit, which we've seen in the past. So we actually feel confident that something will occur there in order to continue with the blender's credit on the biodiesel tax credit.

On the SAF front, as you know, this is something that we're working on right now with different partners. It is going to be an important part of the fuel industry in the future as we go green in terms of aviation fuel. So just based upon, frankly, again the support we see in terms of the direction of SAF, we're optimistic that some form of legislative -- yeah, some form of legislative actions to be taken to support the sustainable aviation fuel industry, SAF industry. And again, it's a nascent industry right now, right? Very few gallons are being produced but projection show that by 2030 there's going to be a need for about 4 billion gallons of sustainable aviation fuel in combination of United States and Europe. So it's a significant growth industry and probably there's going to be some level of support required in order to start up this industry here.

Benjamin Kallo
Analyst at Robert W. Baird

And just on the actually renewable bean product, could you just talk about any areas that you're watching and that we talked about the supply side and how you discount these new production facilities come on line, but can you talk about the demand side and where you're seeing incremental demand coming from the regions that we already know out there or new regions? Thank you, and thanks for all the answers.

Ray G. Young
Executive Vice President and Chief Financial Officer at Archer-Daniels-Midland

No, I mean the demand side is really driven by the different states implementing low carbon fuel standards, LCFS standards, particularly starting out in the West, but frankly it's going to get extended across all the United States and Canada. So the demand side is there, right, as all the states move towards LCFS standards, and frankly the industries are simply trying to respond to that opinion by building the supply to meet that particular requirement there.

Benjamin Kallo
Analyst at Robert W. Baird

Great. Thank you.

Operator

Thank you. We now have a question from Steve Byrne from Bank of America. So, Steve, please go ahead. I have opened your line.

Steve Byrne
Analyst at Bank of America

Yes, thank you. Do you think that soybean oil will represent the majority of the feedstock for this 5 billion gallons of renewable diesel?

Ray G. Young
Executive Vice President and Chief Financial Officer at Archer-Daniels-Midland

It's going to represent an important part of it. I mean, as demand grows for renewable green diesel, it's going to require the pool for many sorts of feedstocks. And in fact, it's very likely that even canola will find a pathway eventually to become part of a feedstock for renewable green diesel. But we still believe that maybe about 45% of the production will come from soybean oil, eventually small production out of the canola oil that I referenced here. So it is going to be an important component because there's just insufficient amount of that they used cooking oil and other types of feedstock fast and renderings. There's just not enough supply in order to meet this growing demand.

Steve Byrne
Analyst at Bank of America

Leaving your 45% is 30 million acres of incremental soybeans, which I don't think is going to happen. Does that mean soybean exports get squeezed out and instead it gets crushed, the oil goes into RD and you export the meal?

Ray G. Young
Executive Vice President and Chief Financial Officer at Archer-Daniels-Midland

We've indicated we believe that a lot of the U.S. soybean oil exports will actually come down. You're correct. I think there is going to be a diversion away from exports of soybean oil. There could also be some diversions away from human food applications. There is going be a daisy chain effect that goes on, which frankly is actually supportive for the entire vegetable oil complex around the world, right? So I think there is going to be some daisy chain effects that are going on in order to meet this type of demand.

Steve Byrne
Analyst at Bank of America

And then what about your Slide 15 where you show forward sales by farmers in South America being below historical averages. Do you attribute that to the uncertainty that they are seeing with their current crop just, just from either drought or excessive rain? And if grain and oilseed production is lower there in 2022 or the rest of the world for that matter, is that a net benefit to you in trading?

Juan R. Luciano
Chairman of the Board of Directors, President and Chief Executive Officer at Archer-Daniels-Midland

Steve, this is Juan. So what you're seeing from the farmer in South America is reflective of both range. One is the current impact in South America. And the second is, as you see, they are looking at the -- what happened with the size of the crop. In terms of whether it's beneficial for ADM or not, our role is to try to fulfill our mission of providing nutrition around the world and that's why we use our supply chain to make sure that we deliver to our customers and we deliver to the populations around the world. So sometimes it coincide with margin expansion in some parts of the business, sometimes it may not. We like the fact that there is a strong demand around the world and that tends to be good for ADM.

Steve Byrne
Analyst at Bank of America

Thank you.

Juan R. Luciano
Chairman of the Board of Directors, President and Chief Executive Officer at Archer-Daniels-Midland

You're welcome.

Operator

Thank you. We now have our next question from Michael Piken of Cleveland Research. So, Michael, please go ahead.

Michael Piken
Analyst at Cleveland Research

Yeah, good morning. Just wanted to sort of get your take on kind of the current transportation system in the outlook that supports both in New Orleans, that we fully recovered from the hurricanes and then kind of the barge system and what's happening over in the ports in China and what sort of the backup and are business flowing normally or how backed up is it?

Juan R. Luciano
Chairman of the Board of Directors, President and Chief Executive Officer at Archer-Daniels-Midland

Yeah, Michael, good question. Talk about -- let's talk about China. Some slight COVID related challenges in China are impacting ports. But to be honest, the situation has improved. Initially, we got the highlights. But in general, port situation continues to improve and maybe we have average waiting about two, three days for bulk cargo in agriculture in most main ports. So I would say China is kind of okay. We see -- we seen lineups or the mortgage [Phonetic] time increasing in Brazil. They're still both exporting corn and importing fertilizers and since the soybean crop is a little bit delayed, we are seeing more -- we're seeing waiting times kind of doubled from maybe 15 days to 30 days in Brazil, and that's pushing some volume into North America for maybe March-April deliveries.

North America export capacity has recovered for the most part. I think there is one plant that was going to have some long-term or medium-term, if you will, repairments. But for the most part, the export capacity has been recovered to pre-Ida level at least for us and I would say in terms of the river, the Illinois river, there is a lot of freezing and there is a lot of icy conditions that have slowed down the river movement. And we see that and that probably will have -- will continue.

Michael Piken
Analyst at Cleveland Research

Great, that's helpful. And then just as a follow-up, what's the elevation margin outlook as you guys see it for the year? Thanks.

Juan R. Luciano
Chairman of the Board of Directors, President and Chief Executive Officer at Archer-Daniels-Midland

We've seen -- as you know, we have the impact of Ida in the Q4. We had the demand, but we didn't have the ability to supply. So a lot of that volume was moved into Q1, and we have seen the elevation margins increasing in Q1. So a little bit as expected. And so we feel good about how to satisfy that demand.

Michael Piken
Analyst at Cleveland Research

Thank you.

Juan R. Luciano
Chairman of the Board of Directors, President and Chief Executive Officer at Archer-Daniels-Midland

You're welcome.

Operator

Thank you. Our last question comes from Eric of Seaport Research Partners. So, Eric, please go ahead.

Eric Larson
Analyst at Seaport Research Partners

Yeah, thank you. Thanks for squeezing me in everybody. Congrats on a great quarter, great year everyone. So I know this has kind of been beaten to death and it's obviously is very important. So if you -- if we get on the renewable, if you just take the renewable green diesel market, if you just look at the amount of feedstock that's required to meet to kind of get to that 2025 goal, a year goal of 5 billion gallons, it's, and I think was alluded to earlier with that 45% common, it's 30 million -- it's 30 million acres of the increased -- it's the equivalent of 30 million acres of soybean production, which it just isn't going to happen.

So -- and I'm sure -- and I know that Greg and Chris are all over this. The -- doesn't this if you -- it's got to be -- it is a global market. It will be. Doesn't just this feed rate in the year into a very positive long-term outlook for Ag Services that you're going to have to be able to pull globally a lot of resources into with these demand functions, but that's what makes it possible. Is that the way to look at this?

Juan R. Luciano
Chairman of the Board of Directors, President and Chief Executive Officer at Archer-Daniels-Midland

Yeah, I think, Eric, when you have one explosion of demand in one place of the world, resources from around the world will come and as Ray was saying, maybe we're going to export less. Certainly, we may import more and there're going to be shift between the different products. So I would say we continue to be in a world that requires more food and also that requires to help the environment because been a structural change in demand for us and for the company that have assets around the world that probably means better utilization of those assets and better value of those assets as we try to solve these issues, yeah.

Eric Larson
Analyst at Seaport Research Partners

Good. Well, thanks. And so the final question I have, and a lot of those that have been answered already. So when we look at the current year in terms of U.S. crop production. So what are you hearing from your pharma clients? Obviously, it looks like we're putting a bit in the corn markets today to get more corn production. There is a lot of uncertainty with input costs and all the other stuff. What is your feel for how in it's early versus not so early anymore, feeling closer [Indecipherable] what is your feel on how the crop production outlook looks for this year by crop?

Juan R. Luciano
Chairman of the Board of Directors, President and Chief Executive Officer at Archer-Daniels-Midland

Yeah, we expect a strong U.S. planting. Of course, some of those decisions, as you said, if you get in the time to make those decisions and a lot of people are looking at the South American weather, South American weather it is very strange at the moment. There is very dry conditions in Parana or the south of Brazil and maybe Argentina, and it was a little bit too wet in the north. Numbers in the north are coming strong in terms of yield for Brazil. I think that the recent rains have stopped the deterioration of the crop in Argentina and the south of Brazil, and probably with Paraguay having already felt the damage.

So we believe in the U.S., we still believe that probably corn will outpace soybeans in terms of acres. So we probably think about, I don't know, something like 93 million acres of corn, 87 million acres of soybean, give or take. And I understand the dynamics about fertilizers and all that. But I think given the prices of last year, I think the prime land will probably maintain the same mix.

Eric Larson
Analyst at Seaport Research Partners

Yeah. No, I would agree with you. Thank you, Juan, and again congratulations on a great year.

Juan R. Luciano
Chairman of the Board of Directors, President and Chief Executive Officer at Archer-Daniels-Midland

Thank you. Thank you, Eric.

Operator

Thank you. I would like to hand it back to Vikram Luthar for some closing remarks.

Vikram Luthar
Senior Vice President, Head of Investor Relations & Chief Financial Officer of Nutrition Business at Archer-Daniels-Midland

Thank you, Greta. Thank you for joining us today. Slide 13 notes upcoming investor events in which we will be participating. As always, please feel free to follow-up with me if you have any other questions. Have a great day and thanks for your time and interest in ADM.

Operator

[Operator Closing Remarks]

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